The Financial Action Task Force of South America Against Money Laundering (GAFISUD) conducted a mutual evaluation of Bolivia's Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime against the Financial Action Task Force (FATF) 40+9 recommendations and special recommendations. GAFISUD published its findings in a 2006 report, in which it concludes that Bolivia is compliant with 3 recommendations and special recommendations; largely compliant with 7; partially compliant with 15 and; non-compliant with 24. The GAFISUD mutual evaluation cites several areas where Bolivia's AML/CFT regime could be enhanced. Perhaps the most important of these is that Bolivia still lacks legislation that specifically criminalizes the financing of terrorism. Therefore, Bolivian authorities also lack the ability to identify, freeze or seize assets linked to terrorist individuals or organizations. The 2008 U.S. Department of State report observes that, in 2006, the Office of the Superintendence of Banks and Financial Institutions (SBEF) received a draft law to criminalize terrorist financing. However, as at the release of the report in March 2008, the bill had not yet been submitted to Congress for further consideration. Furthermore, the mutual evaluation rates Bolivia as non-compliant with all the FATF recommendations pertaining to Designated Non-Financial Business and Professions (DNFBPs), due partly to DNFBPs not being under the supervision of any regulatory body for compliance with AML/CTF standards. Money laundering is criminalized pursuant to Law No. 1768 of 1997, which modifies the Bolivian Penal Code and contains three categories of predicate offenses: narcotics trafficking, organized criminal activities, and public corruption.

General Overview

Money laundering is criminalized pursuant to Law No. 1768 of 1997, which modifies the Bolivian Penal Code and contains three categories of predicate offenses: narcotics trafficking, organized criminal activities and public corruption. Money laundering is punished by one to six years of imprisonment, and by fines of 100-500 days of salary. However, the 2006 Financial Action Task Force of South America Against Money Laundering (GAFISUD) mutual evaluation notes that the categories defined by Law No. 1768 as predicate offenses are insufficient as several predicate offenses are not mentioned in the law, including one on terrorism.

Terrorist acts are criminalized under Article 133 of the Bolivian Penal Code, which classifies terrorism "among the offenses against public order" (IMF 2003, p. 4). Nevertheless, both the 2006 GAFISUD mutual evaluation and the 2008 U.S. Department of State (U.S. DoS) report observe that Bolivia still lacks legislation that specifically criminalizes the financing of terrorism. As a result, Bolivian authorities also lack the ability to identify, freeze or seize assets linked to terrorist individuals or organizations. The U.S. DoS report states that, in 2006, the Office of the Superintendence of Banks and Financial Institutions (SBEF) received a draft law to criminalize terrorist financing. However, as at the release of the report in March 2008, the bill had not yet been submitted to Congress for further contemplation.

The 2008 U.S. DoS report states that Law No. 1768 "defines the use of asset seizure beyond drug-related offenses." However, according to the report, the bulk of asset seizures in Bolivia are conducted by counter-narcotics authorities, primarily the Directorate General for Seized Assets (DIRCABI), which is responsible for confiscating the property of persons either accused or convicted of violating Bolivia's narcotics laws. In October 2007, President Evo Morales signed Decree No. 29305 to improve Bolivia's existing laws regarding asset seizures and forfeiture. Under Decree No. 29305, with judicial approval, Bolivia's financial intelligence unit (FIU), the Unidad de Investigaciones Financieras (UIF), can freeze accounts for up to 48 hours in suspected money laundering cases. However, the U.S. DoS report notes that, so far, this law has only been applied once for money laundering.

According to the 2008 U.S. DoS report, Law No. 1768 created the UIF as an autonomous body within the Office of the Superintendence of Banks and Financial Institutions in 2004. Furthermore, Supreme Decree No. 24771 of 1997 defines the UIF's primary attributes and responsibilities, namely to collect, analyze and disseminate all suspicious transaction reports (STRs) submitted by entities subject to Law No. 1768 to Bolivia's National Police and the Public Ministry (Attorney General's Office), which are subsequently responsible for investigating all cases and prosecuting suspects. Decree No. 24771 also requires financial institutions in general (i.e. banks, insurance companies and securities brokers) to file STRs with the UIF in addition to identifying their customers and retaining records of every transaction for a minimum of ten years. The 2008 U.S. DoS report observes that compliance with reporting requirements is relatively low in Bolivia as the UIF only receives an average of 50 STRs per year. In the first six months of 2007, the UIF received 60 STRs, with banks reporting more frequently. And, as at the release of the U.S. DoS report in March 2008, the UIF was reviewing a total of 110 reports.

The 2008 U.S. DoS report notes that Bolivia is a party to the 1988 United Nations (UN) Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Corruption and the UN Convention against Transnational Organized Crime. Also, Bolivia has signed, but not ratified, the Inter-American Convention against Terrorism. Finally, the report observes that, due to its lack of terrorist financing legislation, Bolivia was suspended from the Egmont Group in July 2007 and is barred indefinitely from participating in Egmont meetings.

The Principles

1. Legal Systems and Related Institutional Measures

NC

The 2006 GAFISUD mutual evaluation finds Bolivia partially compliant with Recommendation (R) 1 regarding the money laundering offence and compliant with R 2 on its mental element and corporate liability. Money laundering is criminalized pursuant to Law No. 1768 of 1997, which modifies the Bolivian Penal Code and contains three categories of predicate offenses: narcotics trafficking, organized criminal activities and public corruption. Money laundering is punished by one to six years of imprisonment, and by fines of 100-500 days of salary. However, according to the 2008 U.S. DoS report, Law No. 1768 cannot be applied unless the prosecutor can prove in court that the accused participated was convicted of one of the predicate offenses. Furthermore, the 2006 GAFISUD mutual evaluation notes that the categories defined by Law No. 1768 as predicate offenses are insufficient as several predicate offenses are not mentioned in the law, including one on terrorism.

According to the 2008 U.S. DoS report, the Constitutional Commission of the Bolivian Chamber is (as of the report's release in March 2008) contemplating two competing anti-money laundering bills, each of which is designed to address the aforementioned deficiencies in Bolivia's current level of compliance with AML/CFT standards. The second draft is particularly promising because it expands predicate offenses for money laundering to include terrorist financing and it increases the number of entities required to be regulated under FATF standards, such as exchange houses and money remitters. However, the U.S. DoS report also notes that there are concerns that the new legislation (if passed) "will not improve the [Government of Bolivia's] GOB overall anti-money laundering regime, which is undermined by the lack of a legal and bureaucratic framework for money laundering investigations."

Bolivia is non-compliant with Special Recommendation (SR) II on the criminalization of terrorist financing as noted in the 2006 GAFISUD report. Terrorist acts are criminalized under Article 133 of the Bolivian Penal Code, which classifies terrorism "among the offenses against public order" (IMF 2003, p. 4). Nevertheless, both the 2006 GAFISUD mutual evaluation and the 2008 U.S. DoS report observe that Bolivia still lacks legislation that specifically criminalizes the financing of terrorism. As a result, Bolivian authorities also lack the ability to identify, freeze or seize assets linked to terrorist individuals or organizations. The U.S. DoS report states that, in 2006, the Office of the Superintendency of Banks and Financial Institutions received a draft law to criminalize terrorist financing. However, as at the release of the report in March 2008, the bill had not yet been submitted to Congress for further contemplation.

Concerning confiscation, freezing and seizing of proceeds of crime (R 3), the GAFISUD mutual evaluation rates Bolivia as largely compliant. The 2008 U.S. DoS report states that Law No. 1768 "defines the use of asset seizure beyond drug-related offenses." However, according to the report, the bulk of asset seizures in Bolivia are conducted by counter-narcotics authorities, primarily the DIRCABI which is responsible for confiscating the property of persons either accused or convicted of violating Bolivia's narcotics laws. In October 2007, President Evo Morales signed Decree No. 29305 (proposed by DIRCABI) to improve Bolivia's existing laws regarding asset seizures and forfeiture. Under Decree No. 29305, with judicial approval, the UIF can freeze accounts for up to 48 hours in suspected money laundering cases. However, the U.S. DoS report notes that, so far, this law has only been applied once for money laundering. In general, the report notes that within the first six months of 2007 DIRCABI initiated 485 cases. Subsequently, 16 bank accounts containing more than $4 million were subject to seizure or forfeiture.

With regards to SR III relating to the freezing of terrorist financing-related assets, the 2006 GAFISUD mutual evaluation rates Bolivia as non-complaint, noting that, since Bolivia still lacks legislation that specifically criminalizes the financing of terrorism, Bolivian authorities also lack the ability to identify, freeze or seize assets linked to terrorist individuals or organizations. However, the 2008 U.S. DoS report notes that the UIF actively "distributes the terrorist lists of the United Nations and the United States, receives and maintains information on terrorist groups, and can freeze suspicious assets under its own authority for up to 48 hours, as it has done in counter-narcotics cases." Nevertheless, according to the 2003 International Monetary Fund's (IMF) Report on the Observance of Standards and Codes (ROSC), since terrorist acts are criminalized under the Bolivian Penal Code, Article 71 of the Code also states that "the commission of an offense entails the loss of the instruments with which [these acts were] committed and of the proceeds thereof" (p. 4). Also, in accordance with the Nuevo Código de Procedimiento Penal (New Code of Criminal Procedure), "the judge, by well-founded decision, may order the seizure of the goods" (p. 4).

In terms of the financial intelligence unit and its functions, the GAFISUD report classifies Bolivia as partially compliant on R 26; partially compliant on R 30 about resources, integrity and training; and non-compliant with R 32 on statistics keeping. According to the 2008 U.S. DoS report, Law No. 1768 created the UIF as an autonomous body within the Office of the Superintendency of Banks and Financial Institutions in 2004. Furthermore, Supreme Decree No. 24771 of 1997 defines the UIF's primary attributes and responsibilities, namely to collect, analyze and disseminate all STRs submitted by entities subject to Law No. 1768 to Bolivia's National Police and the Public Ministry (Attorney General's Office), which are subsequently responsible for investigating all cases and prosecuting suspects. Decree No. 24771 also requires financial institutions in general (i.e. banks, insurance companies and securities brokers) to file STRs with the UIF in addition to identifying their customers and retaining records of every transaction for a minimum of ten years. The 2008 U.S. DoS report observes that compliance with reporting requirements is relatively low in Bolivia as the UIF only receives an average of 50 STRs per year. In the first six months of 2007, the UIF received 60 STRs, with banks reporting more frequently. And, as at the release of the U.S. DoS report in March 2008, the UIF was reviewing a total of 110 reports. The 2006 GAFISUD mutual evaluation cites as a primary weaknesses in the UIF's mandate that only the banking sector has consistently filed STRs, and that the volume of STRs reported by this sector is low and strongly concentrated in one bank.

According to the 2008 U.S. DoS report, in April 2006, to further combat corruption, the GOB promulgated Supreme Decree No. 28695, which would create the "Financial and Property Intelligence Unit" to replace the UIF. Initially, Decree No. 28695 repealed Decree No. 24771, from which the UIF derives its authority. Subsequently, because repealing Decree No. 24771 would eliminate the UIF prior to the launch of its replacement, the GOB passed Decree No. 28956 in November 2006, thus permitting the UIF to continue operating until the Financial and Property Intelligence Unit becomes functional. The report notes that, due to the vacillation between the UIF and the Financial and Property Intelligence Unit, the UIF has lost some staff members, thus worsening its already considerable lack of resources.

The 2006 GAFISUD mutual evaluation observes that Bolivia is partially compliant with R 27 on law enforcement authorities; largely compliant with R 28 on the powers of competent authorities; partially compliant on resources, integrity and training (R 30); and non-complaint on statistics (R 32). Bolivia's Procedural Penal Code provides a broad range of means for these law enforcement agencies to collect evidence and restrain criminal property. Once the prosecution is concluded, the case is then transferred to the Tribunal de Sentencia, which consists of two technical judges and three citizen judges.

According to the 2008 U.S. DoS report, Bolivia's AML/CFT law enforcement regime is undermined by deficiencies in civil responsibility. Most importantly, under Bolivian law, judges, prosecutors or police investigators who make good-faith errors while doing their jobs are not protected. In other words, "if a case is lost initially or on appeal, or if a judge rules that the charges against the accused are unfounded, the accused can request compensation for damages, and the judges, prosecutors, or investigators can be subject to criminal charges for misinterpreting the law" (U.S. DoS 2008). These issues make the investigation of money laundering cases particularly challenging for prosecutors since Bolivia's money laundering laws are rife with contradictions and open to broad interpretation, resulting in Bolivia's prosecutors being hesitant about launching money laundering investigations. The U.S. DoS report notes that, as at the release of the report in March 2008, there had been only one conviction involving money laundering.

2. Preventive Measures - Financial Institutions

NC

The 2006 GAFISUD mutual evaluation finds Bolivia partially compliant with R 5 relating to customer due diligence (CDD) and non-compliant on R 6 concerning to politically exposed persons (PEPs). On correspondent banking (R 7), Bolivia is non-compliant, and on new technologies and non face-to-face business (R 8), Bolivia is rated as partially compliant. The GAFISUD report highlights some key deficiencies with Bolivia's CDD regime, primarily that the present CDD regime does not include all participants in Bolivia's financial system, thus making the regulation and supervision of the sector relatively difficult. Both the GAFISUD mutual evaluation and the 2003 IMF ROSC recommend that Bolivia particularly subject money transfer agents and currency exchange houses to anti-money laundering supervision and controls. Regarding PEPs (R 6), the GAFISUD report recommends that Bolivia introduce specific norms that require the identification, permanent monitoring and approval (on the part of high management) to establish relations with PEPs. On correspondent banking (R 7), the GAFISUD mutual evaluation recommends that Bolivia introduce specific preventive measures related to bank correspondents.

The GAFISUD mutual evaluation rates Bolivia as largely compliant with R 10 on record keeping, and partially compliant with SR VII on wire transfer rules. According to the 2008 U.S. DoS report, while wire transfer businesses have a reputation for freely transferring money into and out of Bolivia, they are not subject to strict anti-money laundering controls. In its 2003 ROSC, the IMF recommends that Bolivia "issue regulations on the minimum information to be included in wire transfers" (p. 13).

The 2006 GAFISUD mutual evaluation rates Bolivia partially compliant with R 13 relating to suspicious transaction reporting and compliant with R 14 about protection and no tipping-off. Pertaining to suspicious transaction reports, the 2008 U.S. DoS report points out that Supreme Decree No. 24771 requires financial institutions in general (i.e. banks, insurance companies and securities brokers) to file STRs with the UIF in addition to identifying their customers and retaining records of every transaction for a minimum of ten years. The U.S. DoS report also observes that compliance with reporting requirements is relatively low in Bolivia as the UIF only receives an average of 50 STRs per year. In the first six months of 2007, the UIF received 60 STRs, with banks reporting more frequently. And, as at the release of the U.S. DoS report in March 2008, the UIF was reviewing a total of only 110 reports. The 2006 GAFISUD mutual evaluation cites as a primary weakness that only the banking sector has consistently filed STRs, and that the volume of STRs reported by this sector is low and strongly concentrated in one bank. The GAFISUD report also observes that Bolivian law regarding STRs (i.e. Supreme Decree No. 24771) does not cover certain kinds of companies, such as exchange houses. Furthermore, the mutual evaluation notes that Bolivia's current laws do not require obliged entities to report attempts at money laundering.

On R 19 regarding other forms of reporting, the mutual evaluation rates Bolivia as non-compliant, and Bolivia is given a non-compliant rating with R 25 on guidelines and feedback. The evaluation also rates Bolivia as non-compliant with SR IV relating to suspicious transactions reporting linked with terrorism. Pertaining to other forms of reporting, the GAFISUD mutual evaluation primarily attributes the non-compliance rating to Bolivia not having a system in place which requires financial institutions to report all cash transactions over a designated threshold. The GAFISUD mutual evaluation attributed the SR IV rating to the fact that Bolivia still lacks legislation that specifically criminalizes the financing of terrorism. As a result, Bolivian law also lacks the mandate to require obligated entities to file STRs in relation to terrorism financing.

The 2006 GAFISUD mutual evaluation finds Bolivia partially compliant with R 15 relating to internal controls, compliance and audit. The GAFISUD report attributes the R 15 rating to Bolivia still lacking legislation that specifically criminalizes the financing of terrorism. In addition, the evaluation notes that laws and regulations pertaining to internal controls, compliance, and audits do not apply to several kinds of companies, such as exchange houses. On R 22 addressing foreign branches and subsidiaries, Bolivia is rated as non-compliant.

According to the 2006 GAFISUD report, Bolivia is non-compliant with R 17 regarding sanctions and partially compliant with R 23 relating to regulation, supervision and monitoring. On R 29 about supervisors, Bolivia is also rated partially compliant. Regarding the "partially compliant" rating assigned to R 23 on regulation, supervision and monitoring, the GAFISUD mutual evaluation states that the SBEF does not exert any supervision over exchange houses and money remitters. On R 29 about supervisors, the GAFISUD report notes that the SBEF and the Office of the Superintendence of Pensions and Insurances (SPVS) have the legal facilities to ensure obligated entities fulfill their AML/CFT obligations, with the exception of exchange houses and money remitters.

3. Preventive Measures - Designated non-Financial Business and Professions

NC

The 2006 GAFISUD report finds Bolivia non-compliant with R 12 on CDD and record keeping obligations for Designated non-Financial Business and Professions (DNFBPs). The GAGISUD report attributes this rating to the fact that DNFBPs in Bolivia are neither supervised nor required by anti-money laundering legislation to fulfill CDD and record keeping obligations. According to the 2008 U.S. DoS report, the Constitutional Commission of the Bolivian Chamber is (as of the report's release in March 2008) contemplating two competing anti-money laundering bills, each of which is designed to address the aforementioned deficiencies in Bolivia's current level of compliance with AML/CFT standards. The second draft is particularly promising because it increases the number of entities required to be regulated under FATF standards, such as exchange houses and money remitters. However, if passed, this new law would still not cover other entities that are required to be regulated under FATF standards, such as dealers in precious metals and jewels.

On R 16 about STRs for DNFBPs, Bolivia is rated as non-compliant. Similarly, concerning R 24 about DNFBP regulation, supervision and monitoring, the 2006 GAFISUD mutual evaluation rates Bolivia as non-compliant. The reasons attributed by the GAFISUD report to its non compliant rating for Bolivia with regards to R 16 are similar to those for R 12. Regarding R 24 about DNFBP regulation, supervision and monitoring, the GAFISUD report notes that Bolivian authorities have yet to designate a system of supervision for DNFBPs to ensure compliance with anti-money laundering measures.

4. Legal Person and Arrangements & Non-Profit Organizations

NC

The 2006 GAFISUD mutual evaluation reports that Bolivia is partially compliant with R 33 relating to legal persons and access to beneficial ownership and control information, due partly to the fact that, under current Bolivian regulations, it is impossible to ascertain information on the final proprietor of joint-stock companies. However, Bolivia is non-compliant with the FATF's recommendation on legal arrangements and beneficial owners (R 34) because Bolivia has yet to implement laws, regulations or rules on legal arrangements and beneficial owners.

On SR VIII relating to non-profit organizations, the mutual evaluation finds Bolivia non-compliant. The report attributes this to the fact that Bolivia completely lacks the necessary mechanisms to prevent the use of charities and non-profit organizations to finance terrorism. In its 2003 ROSC, the IMF recommends that Bolivian authorities "examine the risk of money laundering through NGOs in Bolivia and adopt the necessary controls" (p. 13).

5. National and International Co-operation

NC

The 2006 GAFISUD report finds Bolivia non-compliant with R 31 on national cooperation and non-compliant with R 32 on statistics. The report attributes the rating assigned to R 31 to the absence in Bolivia of an adequate coordination framework that permits and promotes national cooperation among the country's AML/CFT actors. The GAFISUD report highlights some key deficiencies with Bolivia's statistics regime, primarily that, while the UIF has statistics on STRs received and transferred to law enforcement authorities, other competent authorities do not keep reliable statistics. Furthermore, the report states that, due to the paucity of statistics, it is difficult for Bolivian authorities to conduct an examination of the efficiency of their anti-money laundering measures.

The 2006 mutual evaluation rates Bolivia as largely compliant with R 35 regarding the ratification of international conventions, and non-compliant with SR I on implementing UN instruments. Most importantly regarding SR I, the GAFISUD report notes that, as of the release of the report in July 2006, Bolivia had yet to adopt the appropriate legislation to fully comply with the obligations of the UN International Convention for the Suppression of the Financing of Terrorism. However, the 2008 U.S. DoS report notes that Bolivia is a party to the 1988 UN Drug Convention, the UN International Convention for the Suppression of the Financing of Terrorism, the UN Convention against Corruption and the UN Convention against Transnational Organized Crime. Also, Bolivia has signed, but not yet ratified, the Inter-American Convention against Terrorism. Finally, the report observes that, due to its lack of terrorist financing legislation, Bolivia was suspended from the Egmont Group in July 2007 and is barred indefinitely from participating in Egmont meetings.

According to the 2006 GAFISUD report, Bolivia is largely compliant with R 36 concerning Mutual Legal Assistance (MLA). In its 2003 ROSC, the IMF states that international cooperation, including MLA, "takes place generally in accordance with the Código de Procedimiento Penal (Law No. 1970), which is applied by default in the absence of a bilateral or multilateral treaty" (p. 7).

Bolivia is largely compliant with R 37 on dual criminality and partially compliant on R 38 pertaining to MLA on confiscation and freezing as noted in the 2006 GAFISUD report. With regards to SR V on international cooperation, the mutual evaluation rated Bolivia as non-compliant. The mutual evaluation partly attributes its R 38 rating to the fact that Bolivia does not have the agreements or the mechanisms in place to share confiscated goods with other countries. The evaluation also adjudged Bolivia to be non-compliant on R 39 relating to extraditions. According to the 2003 IMF ROSC, Bolivia's ability to extradite for money laundering offences is largely restricted, due to Article 3 of the Penal Code mandating that "no person subject to Bolivian jurisdiction may be extradited to another country, unless an international treaty or reciprocity agreement specifies otherwise" (p. 7-8). In its 2003 ROSC, the IMF recommends that Bolivia "ensure that the offense of money laundering is extraditable in all cases and that seized goods can be shared with other countries" (p. 12). The 2008 U.S. DoS report notes that Bolivia and the United States signed an extradition treaty in June 1995, which entered into force in November 1996. Finally, on R 40 pertaining to other forms of international co-operation, Bolivia is rated largely compliant.